US Airways, pilots union reach deal on pensions
ARLINGTON, Va. -- US Airways and its pilots union have reached an agreement on an underfunded pension plan, clearing a critical hurdle to the air carrier's emergence from bankruptcy to free more than $1 billion in financing.
The agreement was made Saturday between US Airways and the master executive council of the Air Line Pilots Association, according to an announcement by the union representing the pilots on its Web site.
Spokesmen for US Airways and the Pilots Association did not immediately return telephone messages Sunday.
With US Airways running out of cash, the company is working to emerge from bankruptcy to secure $1.24 billion in financing.
The airline has sought to restructure the pilots' pension plan to reduce its costs. Under the existing plan, the airline estimates that it will have to contribute $1.6 billion over the next seven years to keep the plan solvent.
The company believes it can afford to contribute only about $850 million. It has proposed cancellation of the existing plan and using the $850 million to start a new, smaller plan.
Financial details of the new plan were not revealed on the Pilots Association's Web site. The plan affects 4,700 pilots and 1,100 retired pilots.
Pilots generally receive pensions of $50,000 to $70,000 a year, and the union estimated that their pensions could be cut in half under the airline's plan.
The revised pension plan requires the approval of the federal Pension Benefit Guarantee Corp.
U.S. Bankruptcy Judge Stephen Mitchell ruled earlier this month that the airline's financial problems are severe enough that they warrant terminating the pilots' pension plan. But he ordered the airline to resolve the dispute through the collective bargaining process.
The effective date of the new pension plan is April 1.
US Airways filed for Chapter 11 bankruptcy protection last summer. Since then, it has secured wage and benefit concessions from its pilots, stewards and other employee groups.
US Airways sought protection from its creditors after huge losses attributed to the Sept. 11 terrorist attacks.